China Jo-Jo Drugstores Reports Fiscal Year 2019 Financial Results

HANGZHOU,China,July1,2019 --China Jo-Jo Drugstores,Inc. (NASDAQ: CJJD) ("Jo-Jo Drugstores" or the "Company"),a leading online and offline retailer and wholesale distributor of pharmaceutical and other healthcare products and a healthcare provider in China,today announced its financial results for the fiscal year ended March 31,2019.

Mr. Lei Liu,Chairman and Chief Executive Officer of China Jo-Jo Drugstores,Inc.,commented,"We are pleased to present our financial results for our 2019 fiscal year. We increased our top line revenue to $107.55 million for the 2019 fiscal year as compared to $96.11 million for the previous fiscal year. Over the course of the 2019 fiscal year we made great strides in improving our operations and made a key senior appointment by appointing Mr. Wei Hu to serve as our new Chief Operating Officer,to accelerate the transition and digitalization of our company in the rapidly evolving retail drugstore industry. We look forward to further improving our operations and continuing to provide effective and efficient services to our loyal customer base for the coming years."

Fiscal Year 2019 Financial Highlights

For the Year Ended March 31,

($ millions,except per share data)

2019

2018

% Change

Revenue

107.55

96.11

11.9%

Retail drugstores

72.34

61.98

16.7%

Online pharmacy

8.78

12.13

(27.6)%

Wholesale

26.43

22.00

20.1%

Gross profit

25.11

20.13

24.8%

Gross margin

23.3%

20.9%

2.4 pp*

Loss from operations

(0.88)

(18.02)

95.1%

Net loss

(1.32)

(17.06)

92.3%

Loss per share

(0.03)

(0.68)

95.6%

*Notes: pp represents percentage points

Revenues increased by 11.9% to $107.55 million for the fiscal year ended March 31,2019 from $96.11 million for the prior fiscal year.

Gross profit increased by 24.8% to $25.11 million for the fiscal year ended March 31,2019 from $20.13 million for prior fiscal year.

Gross margin increased by 2.4 percentage points to 23.3% for the fiscal year ended March 31,2019 from 20.9% for the prior fiscal year.

Net loss was $1.32 million,or $0.03 per basic and diluted share,for the fiscal year ended March 31,2019,compared to $17.06 million,or $0.68 per basic and diluted share,for the same period of last year,which is a decrease in loss.

Fiscal Year 2019 Financial Results

Revenue

Revenue for the fiscal year ended March 31,2019 increased by $11.44 million,or 11.9%,to $107.55 million from $96.11 million for the prior fiscal year. The increase in revenue was primarily due to the revenue increase in retail drugstores and wholesale business,partially offset by the decrease in online sales business.

For the Year Ended March 31,

2019

2018

($ millions)

Revenue

Cost of

Goods

Gross Margin

Revenue

Cost of

Goods

Gross Margin

Retail drugstores

72.34

51.25

29.2%

61.98

45.92

25.9%

Online pharmacy

8.78

7.75

11.8%

12.13

10.86

10.5%

Wholesale

26.43

23.45

11.3%

22.00

19.21

12.7%

Total

107.55

82.44

23.3%

96.11

75.99

20.9%

Revenue from the retail drugstores business increased by $10.36 million,or 16.7%,to $72.34million for the fiscal year ended March 31,2019 from $61.98 million for the prior fiscal year. The increase was primarily due to consumer-facing benefits such as emphasis on onsite medical care,chronic disease management,incremental DTP (Direct-to-Patient) business caused by continuous hospital medical reform,and the maturation of stores opened a year ago.

Revenue from the online pharmacy business decreased by $3.35 million,or 27.6%,to $8.78 million for the fiscal year ended March 31,2019 from $12.13 million for the prior fiscal year. The decrease was mainly caused by a decline in sales via e-commerce platforms which suspended OTC drug sales on their sites directly,offset by the increase in business referred from Pharmacy Benefit Management ("PBM") providers. The Company is adding more non-medical health products such as nutritional supplements into its product offerings to counteract the decline in sale of OTC drugs.

Revenue from the wholesale business increased by $4.43 million,or 20.1%,to $26.43 million for the fiscal year ended March 31,2019 from $22.00 million for the prior fiscal year. The increase was primarily a result of the Company's ability to resell certain products,which the Company sold in large quantity at its retail stores,to other vendors at competitive prices,as well as sales of certain nutritional supplements tosales agents.

Gross profit and gross margin

Total cost of goods sold increased by $6.45million,or 8.5%,to $82.44 million for the fiscal year ended March 31,2019 from $75.99 million for the prior fiscal year. Gross profit increased by $4.99million,or 24.8%,to $25.11 million for the fiscal year ended March 31,2019 from $20.13 million for the prior fiscal year.Overall gross margin increased by 2.4 percentage points to 23.3% for the fiscal year ended March 31,from 20.9% for the prior fiscal year,due to higher retail profit margins.

Gross margin for theCompany'sretail drugstores segment increased by 3.3 percentage points to 29.2% for the fiscal year ended March 31,from 25.9% for the prior fiscal year,primarily because of the introduction of new suppliers,and the continuing renegotiating of prices with the Company's suppliers.

Gross margin for the online pharmacy segment increased by 1.3 percentage points to 11.8% for the fiscal year ended March 31,from 10.5% for the prior fiscal year,primarily due to the increase in sales via the Company's own official website,offset by decrease in sale via third-party platforms,which are usually subject to low profit margin.

Gross marginfor the Company'swholesale segmentdecreased by 1.4 percentage to 11.3% for the fiscal year ended March 31,from 12.7% for the prior fiscal year,primarily as a result of variation in the products the Company carries and sells to certain pharmaceutical vendors.

Loss from operations

Selling and marketing expenses increased by $5.53 million,or 29.5%,to $24.27 million for the fiscal year ended March 31,2019 from $18.74 million for the prior fiscal year,primarily due to increases in labor and rent related to store expansions and increases in the cost of living.

General and administrative expenses decreased by $16.10 million,or 90.4%,to $1.72 million for the fiscal year ended March 31,2019 from $17.82 million for the prior fiscal year. In fiscal 2019,in order to use cash more efficiently,the Company accelerated the collection of advances to suppliers and accounts receivables. Specifically,we focused on the collection of aged accounts of advances to suppliers and accounts receivable.As the Company has collected these amounts,its allowance on doubtful accounts decreased by approximately $7.7 million. Additionally,the Company's stock compensation expense decreased by approximately $6.8 million primarily as a result of issuing shares to its key employees in fiscal 2018. Excluding such expenses,general and administrative expenses decreased by approximately $1.6 million or 9%,which reflects control of expense such as overall management cash compensation in fiscal year 2019.

Impairment of long-lived assets was nil for the fiscal year ended March 31,compared to $1.58 million for the prior fiscal year. On March 31,2018,Jiuxin Medicine started outsourcing its logistic service to Astro Boy Cloud Pan (Hangzhou) Storage and Logistic Co. Ltd,Jiuxin Medicine's warehouse lease has been terminated. As a result,approximately $1.58 million in unamortized warehouse improvements were recognized as expenses in the year ended March 31,2018. Such impairment was made after the Company estimated that the implied fair value of long-lived assets was lower than their carrying value.

Loss from operations was $0.88 million for the fiscal year ended March 31,compared to $18.02 million for the prior fiscal year. Operating margin was negative 0.8% for the fiscal year ended March 31,compared to negative 18.8% for the prior fiscal year.

Net loss

Net loss was $1.32 million,or $0.03 per basic and diluted share for the fiscal year ended March 31,compared to net loss of $17.06 million,or $0.68 per basic and diluted share for the prior fiscal year.

Financial Condition

As of March 31,the Company had cash of $24.75million,compared to $31.45million as of March 31,2018. Net cash used in operating activities was $5.60 million for the fiscal year ended March 31,compared to $2.07 million for the prior fiscal year. Net cash used in investing activities was $7.33 million for the fiscal year ended March 31,compared to $2.98 million for the prior fiscal year. Net cash provided by financing activities was $8.08 million for the fiscal year ended March 31,compared to net cash used in financing activities of $4.89 million for the prior fiscal year.

About China Jo-Jo Drugstores,Inc.

China Jo-Jo Drugstores,Inc. ("Jo-Jo Drugstores" or the "Company"),is a leading online and offline retailer and wholesale distributor of pharmaceutical and other healthcare products in China. Jo-Jo Drugstores currently operates retail drugstores and an online pharmacy. It is also a wholesale distributor of products similar to those carried in its pharmacies and it cultivates and sells herbs used for traditional Chinese medicine. For more information about the Company,please visit http://jiuzhou360.com. The Company routinely posts important information on its website.

Forward-Looking Statements

This press release contains information about the Company's view of its future expectations,plans and prospects that constitute forward-looking statements.Actual results may differ materially from historical results or those indicated by these forward-looking statements as a result of a variety of factors including,but not limited to,risks and uncertainties associated with its ability to raise additional funding,its ability to maintain and grow its business,variability of operating results,its ability to maintain and enhance its brand,its development and introduction of new products and services,the successful integration of acquired companies,technologies and assets into its portfolio of products and services,marketing and other business development initiatives,competition in the industry,general government regulation,economic conditions,dependence on key personnel,the ability to attract,hire and retain personnel who possess the technical skills and experience necessary to meet the requirements of its clients,and its ability to protect its intellectual property.The Company's encourages you to review other factors that may affect its future results in the Company's annual reports and in its other filings with the Securities and Exchange Commission.

For more information,please contact:

Company Contact:

Frank Zhao

Chief Financial Officer

+86-571-88219579

frank.zhao@jojodrugstores.com

Steve Liu

Investor Relations Director

steve.liu@jojodrugstores.com

Investor Relations Contact:

Tina Xiao

Ascent Investor Relations LLC

+1-917-609-0333

tina.xiao@ascent-ir.com

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

March31,

March31,

2019

2018

ASSETS

CURRENT ASSETS

Cash

$

9,322,463

$

15,132,640

Restricted cash

15,422,739

16,319,551

Financial assets available for sale

180,928

175,140

Notes receivable

177,278

279,082

Trade accounts receivable

8,692,514

8,393

Inventories

13,955,202

13,429,568

Other receivables,net

4,438,230

3,098,079

Advances to suppliers

1,950,252

3,447,452

Other current assets

2,063,375

2,116,237

Total current assets

56,202,981

62,320,142

PROPERTY AND EQUIPMENT,net

8,727,358

2,843,640

OTHER ASSETS

Long-term investment

24,243

40,890

Farmland assets

825,259

796,286

Long term deposits

2,157,275

2,501,968

Other noncurrent assets

1,196,197

1,253,352

Intangible assets,net

3,597,323

4,056,414

Total other assets

7,800,297

8,648,910

Total assets

$

72,730,636

$

73,812,692

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable,trade

23,106,230

25,259,526

Notes payable

25,951,673

19,180,200

Other payables

3,197,221

4,272,523

Other payables - related parties

795,179

850,342

Customer deposits

771,942

4,040,867

Taxes payable

125,859

366,040

Accrued liabilities

1,264,182

841,993

Total current liabilities

55,212,286

54,811,491

Financial liability

465,248

-

Purchase option and warrants liability

81,935

138,796

Total liabilities

55,759,469

54,287

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

Common stock; $0.001 par value; 250,000,000 shares authorized; 28,936,778 and 28,778 shares issued and outstanding as of March31,2019 and March 31,2018

28,937

28,937

Preferred stock; $0.001 par value; 10,000 shares authorized; nil issued and outstanding as of March31,2018

-

-

Additional paid-in capital

44,905,664

43,599,089

Statutory reserves

1,309,109

1,109

Accumulated deficit

(30,587,468)

(29,661,190)

Accumulated other comprehensive income

2,508,964

3,586,460

Total stockholders' equity

18,165,206

18,862,405

Noncontrolling interests

(1,194,039)

-

Total equity

16,971,167

18,405

Total liabilities and stockholders' equity

$

72,692

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)

For the years ended

March 31,

2019

2018

REVENUES,NET

$

107,551,012

$

96,112,706

COST OF GOODS SOLD

82,442,969

75,987,537

GROSS PROFIT

25,108,043

20,125,169

SELLING EXPENSES

24,265,184

18,739,492

GENERAL AND ADMINISTRATIVE EXPENSES

1,718,989

17,823,661

IMPAIRMENT OF LONG-LIVED ASSETS

-

1,583,186

TOTAL OPERATING EXPENSES

25,984,173

38,146,339

LOSS FROM OPERATIONS

(876,130)

(18,021,170)

INTEREST INCOME

112,887

478,976

OTHER INCOME,NET

(93,311)

201,096

CHANGE IN FAIR VALUE OF PURCHASE OPTION AND WARRANTS LIABILITY

(326,452)

357,421

LOSS BEFORE INCOME TAXES

(1,183,006)

(16,983,677)

PROVISION FOR INCOME TAXES

134,763

76,256

NET LOSS

(1,317,769)

(17,059,933)

ADD: NET (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST

391,491

-

NET (LOSS) ATTRIBUTABLE TO CHINA JO-JO DRUGSTORES,INC.

(926,278)

(17,933)

OTHER COMPREHENSIVE LOSS

Foreign currency translation adjustments

(1,077,496)

2,236,398

COMPREHENSIVE LOSS

(2,395,265)

(14,535)

WEIGHTED AVERAGE NUMBER OF SHARES:

Basic

28,778

25,241,748

Diluted

28,748

LOSS PER SHARES:

Basic

$

(0.03)

$

(0.68)

Diluted

$

(0.03)

$

(0.68)

CHINA JO-JO DRUGSTORES,INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended

March 31,

2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

(1,769)

$

(17,933)

Adjustments to reconcile net income to net cash provided by operating activities:

Bad debt direct write-off and provision

(3,357,851)

4,009,636

Depreciation and amortization

1,676,413

1,383,810

Impairment of leasehold improvement

1,186

Stock based compensation

197,100

7,563

Change in fair value of purchase option derivative liability

326,452

(357,421)

Change in operating assets:

Accounts receivable,trade

(116,810)

(2,072,486)

Notes receivable

83,910

(1,005)

Inventories and biological assets

(1,390,823)

(2,411,209)

Other receivables

(1,308,437)

(489,334)

Advances to suppliers

3,612,453

1,121,006

Long term deposit

183,841

15,103

Other current assets

(83,372)

(377,391)

Other noncurrent assets

(23,511)

36,091

Change in operating liabilities:

Accounts payable,trade

(528,353)

3,726,625

Other payables and accrued liabilities

(328,473)

1,115,267

Customer deposits

(3,011,194)

1,048,939

Taxes payable

(216,792)

(362,513)

Net cash provided by operating activities

(5,603,216)

(2,070,066)

CASH FLOWS FROM INVESTING ACTIVITIES:

Disposal of financialassetsavailableforsale

87,290

-

Purchase of financialassetsavailableforsale

(104,360)

(75,513)

Acquisition of equipmentand building

(5,450,934)

(414,398)

Increase intangible assets

(29,817)

(1,140,102

Additions to leasehold improvements

(1,828,360)

(1,347,489)

Net cash provided by (used in) investing activities

(7,326,181)

(2,977,502)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from notes payable

42,030,521

27,461,423

Repayment of notes payable

(34,018,811)

(22,476,740)

Increase in financial liability

81,997

-

Proceeds from sale of stock and warrants

7,529

-

Repayment of other payables-related parties

(22,655)

(91,395)

Net cash provided by(used in) financing activities

8,078,581

4,893,288

EFFECT OF EXCHANGE RATE ON CASH

(1,856,174)

3,810,661

(DECREASE) INCREASE IN CASHAND CASH EQUIVALENTS AND RESTRICTED CASH

(6,706,989)

3,656,381

CASHAND CASH EQUIVALENTS AND RESTRICTED CASH,beginning of year

31,452,191

27,795,810

CASHAND CASH EQUIVALENTS AND RESTRICTED CASH,end of year

$

24,745,202

$

31,191

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes

$

56,422

$

27,825

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